Correlation Between New Gold and Torex Gold

Can any of the company-specific risk be diversified away by investing in both New Gold and Torex Gold at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining New Gold and Torex Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New Gold and Torex Gold Resources, you can compare the effects of market volatilities on New Gold and Torex Gold and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in New Gold with a short position of Torex Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Gold and Torex Gold.

Diversification Opportunities for New Gold and Torex Gold

0.19

Correlation Coefficient

New Gold  Torex Gold

Average diversification

The 3 months correlation between New and Torex is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding New Gold and Torex Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torex Gold Resources and New Gold is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on New Gold are associated (or correlated) with Torex Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torex Gold Resources has no effect on the direction of New Gold i.e., New Gold and Torex Gold go up and down completely randomly.

Pair Corralation between New Gold and Torex Gold

Assuming the 90 days trading horizon New Gold is expected to generate 1.1 times more return on investment than Torex Gold. However, New Gold is 1.1 times more volatile than Torex Gold Resources. It trades about 0.12 of its potential returns per unit of risk. Torex Gold Resources is currently generating about 0.1 per unit of risk. If you would invest  272.00  in New Gold on September 12, 2024 and sell it today you would earn a total of  141.00  from holding New Gold or generate 51.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

New Gold  vs.  Torex Gold Resources

New Gold

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, New Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Torex Gold Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Torex Gold Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Torex Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Gold and Torex Gold

The main advantage of trading using opposite New Gold and Torex Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Gold position performs unexpectedly, Torex Gold can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Torex Gold will offset losses from the drop in Torex Gold's long position.

The idea behind New Gold and Torex Gold Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.